On Wednesday 16 May, the members of the committee on economic and monetary affairs of the European Parliament adopted, by a very large majority (45 votes to 4, with 5 abstentions), the draft report by Danuta Hübner (EPP, Poland), on the legislative proposal aiming to reinforce the supervision of the central counterparties (CCP) of the EU and of third countries (see EUROPE 11807).
In one major point, the MEPs have decided to retain the possibility opened up by the Commission’s proposal, by recommendation of ESMA and the central bank of issuance, to make decisions establishing that a third-country central counterparty should not be recognised by the EU and that in order to be able to provide clearing services in the EU, it must be accredited and established in one of the member states.
This provision is not unrelated to Brexit, as with nearly 75% of euro interest rate derivatives cleared in the United Kingdom, the forthcoming withdrawal of the country from the EU would leave a considerable volume of transactions not covered by European rules and architecture.
The compromise text, of which EUROPE has had sight, ultimately makes very few changes to the initial proposal and, in particular, goes no further than to tighten up the governance of the procedure, by attenuating the discretionary nature of the proposal and setting clear criteria to be used to assess the need for relocation, for instance its size, its risk profile and the availability of alternative clearing services in currencies in question.
It is therefore on a reinforced role for ESMA that the MEPs agreed, in order to centralise supervision and reduce the risk of regulatory arbitration. A new recital clarifies that the division of competences set out in this regulation is likely to change as the role and capacity of ESMA develop.
The text also takes up the proposal of the rapporteur (see EUROPE 11966) to set up, instead of the ‘executive session of the CCPs’ called for by the Commission, an ‘internal CCP supervisory committee’ within ESMA, which will be specifically responsible for all duties related to the supervision of EU and third-country CCPs. This committee would be made up of authorities experienced in the supervision of central counterparties and an independent president and vice-president.
The MEPs also opted to retain a certain symmetry between the supervision of European CCPs and of third-country CCPs. The supervision of European and non-European CCPs should be seen as the same thing and it is important to retain coherence and treat both matters at the same time, said French MEP Anne Sander (EPP), in a press release.
Justifications. This position does not mean that the European Parliament wishes to force CCPs based in the UK to move after Brexit, but more that it wants more regulatory powers over CCPs based outside the EU that are clearing transactions in euro, the EPP group explained in a press release issued just before the vote.
“Increased powers for ESMA (…) does not mean that we are taking any powers away from third country regulators in their own country”, Hübner, anticipating criticism, clarifies in a press release.
Sander, however, considers that the relocation powers should not be an empty threat, but should make it possible to protect European interests and sovereignty.
One of the likely stumbling blocks between the Council and Parliament during the forthcoming negotiations will undoubtedly be this reinforced role for ESMA. However, the Council is still a long way from an agreement. (Original version in French by Marion Fontana)